vulcan materials company - sec.gov | home 13, 2006 to our shareholders: you are cordially invited to...

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0000103973-06-000088.txt : 200604130000103973-06-000088.hdr.sgml : 2006041320060413104847ACCESSION NUMBER:0000103973-06-000088CONFORMED SUBMISSION TYPE:DEF 14APUBLIC DOCUMENT COUNT:15CONFORMED PERIOD OF REPORT:20060512FILED AS OF DATE:20060413DATE AS OF CHANGE:20060413EFFECTIVENESS DATE:20060413

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:VULCAN MATERIALS COCENTRAL INDEX KEY:0000103973STANDARD INDUSTRIAL CLASSIFICATION:MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400]IRS NUMBER:630366371STATE OF INCORPORATION:NJFISCAL YEAR END:1231

FILING VALUES:FORM TYPE:DEF 14ASEC ACT:1934 ActSEC FILE NUMBER:001-04033FILM NUMBER:06757476

BUSINESS ADDRESS:STREET 1:1200 URBAN CENTER DRIVECITY:BIRMINGHAMSTATE:ALZIP:35242BUSINESS PHONE:2052983000

MAIL ADDRESS:STREET 1:PO BOX 385014CITY:BIRMINGHAMSTATE:ALZIP:35238-5014

DEF 14A1proxy2006.htm

Vulcan Materials Company

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the registrant [x]

Filed by a party other than the registrant [_]

Check the appropriate box:

[_] Preliminary proxy statement
[_] Confidential, for Use of the Commission Only
[x] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Section 240.14a-12

VULCAN MATERIALS COMPANY
(Name of Registrant as Specified in Its Charter)

Payment of filing fee (Check the appropriate box):

[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(I) (1) and 0-11.

(1)Title of each class of securities to which transaction applies:
(2)Aggregate number of securities to which transaction applies:
(3)Per unit price or other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4)Proposed maximum aggregate value of transaction:
(5)Total fee paid:

[_] Fee paid previously with preliminary materials:

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a) (2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)Amount Previously Paid:
(2)Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4)Date Filed:

April 13, 2006

To Our Shareholders:

You are cordially invited to attend the 50th Annual Meeting of the Shareholders of Vulcan Materials Company, which will be held at Renaissance Ross Bridge Resort in Birmingham, Alabama, on Friday, May 12, 2006, at 9:00 a.m., Central Daylight Time. The formal Notice of the annual meeting, the proxy statement and a proxy accompany this letter.

We hope that you will attend the meeting. Your vote is important. Whether or not you plan to attend the meeting, we encourage you to vote by proxy. You can also vote by proxy via the telephone or the Internet using the instructions on your proxy card. Your prompt vote will be greatly appreciated.

Our Annual Report to Shareholders for 2005 is enclosed. We trust you will find it interesting and informative.

Sincerely yours,

DONALD M. JAMES
Chairman and
Chief Executive Officer

TABLE OF CONTENTS

Page

Notice of Annual Meeting of the Shareholders
General Information About the Annual Meeting and Voting
Proposal 1: Election of Directors
Board of Directors and Committees
Compensation of Directors
Stock Ownership of Certain Beneficial Owners
Stock Ownership of Management
Executive Compensation
Equity Compensation Plans
Report of the Compensation Committee
Report of the Audit Committee
Independent Auditors
Shareholder Return Performance Presentation
Retirement Income Plan
Change of Control Employment Agreements
Proposal 2: Approval of 2006 Omnibus Long-Term Incentive Plan
Proposal 3: Ratification of Appointment of Independent Registered Public Accountants
Certain Relationships and Related Transactions
Householding of Proxy Materials
Section 16(a) Beneficial Ownership Reporting Compliance
Shareholder Proposals for 2007
Appendix A - Director Independence Criteria
Appendix B - Audit Committee Charter
Appendix C - 2006 Omnibus Long-Term Incentive Plan

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NOTICE OF ANNUAL MEETING OF THE SHAREHOLDERS
TO BE HELD MAY 12, 2006

To the Shareholders of the Company:

NOTICE IS HEREBY GIVEN that the 50th Annual Meeting of the Shareholders of Vulcan Materials Company (the "Company") will be held at Renaissance Ross Bridge Resort, 4000 Grand Avenue, Birmingham, Alabama, on Friday, May12, 2006, at 9:00 a.m., Central Daylight Time, for the following purposes:

1.

To elect three directors to serve three-year terms and one director to serve a two-year term.

2.

To approve the 2006 Omnibus Long-Term Incentive Plan.

3.

To ratify the appointment of Deloitte & Touche LLP as independent registered public accountants for 2006.

4.

To conduct such other business as may properly come before the meeting.

Shareholders who owned stock at the close of business on March 21, 2006 can vote at the meeting.

By Order of the Board of Directors,

WILLIAM F. DENSON, III
Secretary

1200 Urban Center Drive
Birmingham, Alabama 35242
April 13, 2006

NOTE - Please sign, date and return your proxy
as promptly as possible
whether you own one or many shares.

VULCAN MATERIALS COMPANY
1200 URBAN CENTER DRIVE, BIRMINGHAM, ALABAMA 35242

PROXY STATEMENT FOR THE
ANNUAL MEETING OF THE SHAREHOLDERS
TO BE HELD MAY 12, 2006

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

Why am I receiving these materials?

This proxy statement is being sent to all shareholders of record as of the close of business on March 21, 2006 in connection with the solicitation of proxies by Vulcan Materials Company (the "Company" or "Vulcan") for use at the 50th Annual Meeting of Shareholders. This proxy statement, the enclosed proxy card and Vulcan's 2005 Annual Report to Shareholders are being first mailed to our shareholders on or about April 13, 2006. The meeting will be held at Renaissance Ross Bridge Resort, 4000 Grand Avenue, Birmingham, Alabama on May 12, 2006, at 9:00 a.m. Central Daylight Time.

Who can attend the Annual Meeting?

Only shareholders of the Company as of the record date, March 21, 2006, their authorized representatives and invited guests of the Company will be able to attend the annual meeting.

Who is entitled to vote?

All Vulcan shareholders as of the record date, March 21, 2006, will be entitled to vote at the 2006 annual meeting. On the record date there were 100,578,323 shares outstanding. Each share is entitled to one vote on each matter properly brought before the meeting.

How do I vote if I am a registered shareholder?

Proxies are solicited to give all shareholders who are entitled to vote on the matters that come before the meeting the opportunity to vote their shares whether or not they attend the meeting in person. You can vote your proxy in one of the following manners:

-Via Internet
-By telephone
-By mail or
-In person at the annual meeting

Choosing to vote via the Internet or calling the toll-free number listed on the proxy card will save the Company expense. Internet and telephone voting information is provided on the proxy card. A control number, located on the upper right of the proxy card, is used to verify your identity when voting via the Internet or by telephone. If you vote via the Internet or by telephone, please do not return a signed proxy card.

If you choose to vote by mail, mark your proxy card enclosed with the proxy statement, date and sign it, and mail it in the postage-paid envelope.

If you wish to vote in person, you can do so by ballot at the meeting.

How do I specify how I want my shares voted?

You can specify how you want your shares voted on each proposal by marking the appropriate boxes on the proxy card or indicating your vote on each proposal via the telephone or Internet. Please review the voting instructions on the proxy card and read the entire text concerning the proposals in this proxy statement prior to voting.

If your proxy card is signed and returned without specifying a vote or an abstention on a proposal, it will be voted according to the recommendation of the Board on that proposal. The Board's recommendations are shown for each proposal on the proxy card and in this proxy statement.

How do I vote if I am a beneficial shareholder?

If you are a beneficial shareholder, meaning you hold your Vulcan shares in street name, you have the right to direct your bank, broker or nominee on how to vote the shares. You should complete a voting instruction card provided to you by your bank, broker or nominee or vote by Internet or telephone as instructed by your bank, broker or other nominee. If you wish to vote in person at the meeting, you must first obtain from the holder of record a proxy issued in your name.

What items will be voted upon at the Annual Meeting?

There are three proposals that will be presented at the meeting:

election of three directors to serve three-year terms and one director to serve a two-year term;
approval of the 2006 Omnibus Long-Term Incentive Plan; and
ratification of appointment of Deloitte & Touche LLP as Vulcan's independent registered public accountants for 2006.

These proposals have been submitted on behalf of Vulcan's Board of Directors. We know of no other matters that may be brought before the meeting. However, if any other matters are properly presented for action, it is the intention of the proxies named on the proxy card to vote on them according to their best judgment.

What are the Board of Directors' voting recommendations?

For the reasons set forth in more detail later in this proxy statement, the Board recommends a vote FOR the election of each of the director candidates, FOR the approval of the 2006 Omnibus Long-Term Incentive Plan, and FOR the ratification of the appointment of Deloitte & Touche LLP as independent registered public accountants for 2006.

How many votes are needed to have the proposals pass?

The affirmative vote of a majority of the votes cast is required to elect each of the directors, to approve the Omnibus Plan and to ratify the appointment of Deloitte & Touche. Directors who do not receive the required majority are required to tender their resignations to the Board for consideration.

How are the votes counted?

For purposes of determining the number of votes cast with respect to a particular matter, only those cast "For" or "Against" or "Withheld" are included. Abstentions and broker non-votes are counted only for purposes of determining whether a quorum is present at the meeting, are not considered votes cast, and thus will not affect the outcome of the vote.

How can I revoke my Proxy?

You may revoke your proxy at any time before it is voted at the meeting by taking one of the following actions:

-by giving timely written notice of the revocation to the Secretary of the Company;
-by executing and delivering a proxy with a later date;
-by voting by telephone or via Internet at a later date (in which case only the last vote is counted); or
-by voting in person at the meeting.

Who counts the votes?

Tabulation of the votes cast at the meeting is conducted by an independent agent and certified to by independent inspectors of election.

Is my vote confidential?

All proxies are held in confidence, unless the shareholder writes comments or requests disclosure on the proxy, where disclosure may be required by law, and in certain circumstances where the proxy solicitation is not approved by the Board.

Who will pay for the costs involved in the solicitation of proxies?

The Company will pay all costs of preparing, assembling, printing and distributing the proxy materials. Management has retained Georgeson Shareholder Communications Inc. to assist in soliciting proxies for a fee of $6,500, plus reasonable out-of-pocket expenses. The Company will, upon request, reimburse brokerage firms and others for their reasonable expenses incurred for forwarding solicitation material to beneficial owners of stock.

How do I contact directors?

The Board has established a process for shareholders and other interested parties to communicate directly with the presiding director or with the non-management directors individually or as a group. Any shareholder or other interested party who desires to contact one or more of Vulcan's non-management directors, including the Board's presiding director, may send correspondence to the following address:

Board of Directors (or presiding director or name of individual director)
c/o Corporate Secretary

All such communications will be forwarded to the appropriate director or directors specified in such communications as soon as practicable.

In addition, as provided on Vulcan's website at www.vulcanmaterials.com under the heading "Investor Relations" and then under the heading "Corporate Governance - Contact the Board of Directors," any shareholder or interested party who has any concerns or complaints relating to accounting, internal accounting controls or auditing matters, may contact the Audit Committee by writing to the following address:

Vulcan Audit Committee
c/o Corporate Secretary

CORPORATE GOVERNANCE

The Board has adopted Corporate Governance Guidelines which provide a framework for the governance of the Company. The Guidelines build on practices which we have followed for many years and, we believe, demonstrate our continuing commitment to corporate governance excellence.

Our Guidelines provide that a substantial majority of the members of the Board must meet the criteria for independence as required by applicable law and the New York Stock Exchange listing standards. The New York Stock Exchange listing standards require that a majority of directors be independent. No director qualifies as independent unless the Board determines that the director has no direct or indirect material relationship with the Company. The Board has adopted Director Independence Criteria, attached hereto as AppendixA, to assist it in making determinations of independence.

The Board has determined that all nine of our non-management directors are independent and meet the Director Independence Criteria. The only director who is not independent is Mr. James, our Chief Executive Officer and Chairman. Mr. James currently serves on the board of directors of three companies in addition to Vulcan. Mr. James has informed Vulcan that he intends to resign from one of the outside boards no later than that company's

2006 annual meeting, bringing the number of his outside board memberships to two. See the discussion under the heading "Director Independence" below.

We have a Business Conduct Policy that applies to all of our employees and deals with a variety of corporate compliance issues, including conflicts of interest, compliance with laws, confidentiality of company information, fair dealing and use of company assets. All employees are required to fill out a questionnaire annually regarding their personal compliance with the Business Conduct Policy and are encouraged to report any illegal or unethical behavior of which they become aware.

The Board has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers. The Code of Ethics defines "Senior Financial Officers" to include the Chief Financial Officer and Controller and principal accounting officer. The Code of Ethics covers such topics as financial reporting, conflicts of interest and compliance with laws. If we make any amendment to, or waiver of, any provision of the Code of Ethics, we will disclose such information on our website.

You can access our bylaws, Corporate Governance Guidelines, Business Conduct Policy and Code of Ethics at our website www.vulcanmaterials.com or you can obtain a copy by writing to us at: Corporate Secretary, Vulcan Materials Company, 1200 Urban Center Drive, Birmingham, Alabama 35242. We will provide any of these documents free of charge. Please note that the information contained on our website is not incorporated by reference in, nor considered to be a part of, this proxy statement.

Electronic Delivery of Proxy Materials

You can also access Vulcan's proxy statement and 2005 Annual Report on Form 10-K, which includes our annual report to shareholders, via the Internet at www.vulcanmaterials.com under the heading "Investor Relations." For next year's shareholders' meeting, you can help us save significant printing and mailing expenses by consenting to access the proxy statement, proxy card and annual report to shareholders electronically over the Internet. If you hold your shares in your own name (instead of through a bank, broker or other nominee), you can choose this option by following the instructions at the Internet voting website at www.proxyvotenow.com/vmc, which has been established for you to vote your shares for the meeting. If you choose to receive your proxy materials and annual report to shareholders electronically, then prior to next year's shareholders' meeting you will receive an e-mail notification when the proxy materials and annual report to shareholders are available for on-line review over the Internet, as well as the instructions for voting electronically over the Internet. Your choice for electronic distribution will remain in effect for subsequent meetings unless you revoke it prior to future meetings by sending a written request to: Secretary, Vulcan Materials Company, 1200 Urban Center Drive, Birmingham, Alabama 35242 or revoking your request online.

A copy of our 2005 Annual Report on Form 10-K will be provided to you without charge (except for exhibits) upon written request to Mark D. Warren, Director, Investor Relations, Vulcan Materials Company, 1200 Urban Center Drive, Birmingham, Alabama 35242.

PROPOSAL 1. ELECTION OF DIRECTORS

The Company's Board is divided into three classes for purposes of election. One class is elected at each annual meeting to serve a three-year term.

The Board has nominated three persons for election as directors to serve three-year terms expiring in 2009 and one director to serve a two-year term expiring in 2008, the date on which such director reaches mandatory retirement age. Unless otherwise directed, proxies will be voted in favor of these four nominees. Should any of the nominees be unable to accept election, the proxies will be voted for the election of such other person or persons who is nominated by the Board on the recommendation of the Governance Committee. Each of the nominees has consented to serve if elected, and the Board has no reason to believe that any of the persons nominated will be unable to serve as a director.

NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
TERM EXPIRING IN 2008

Orin R. Smith
Age: 70. Director since 1983.
Retired Chairman and Chief Executive Officer of Engelhard Corporation, Iselin, New Jersey (provider of environmental technologies, performance products, engineered materials and related services).
Other directorships: Applera Corporation; Ingersoll-Rand Company.
Committee memberships: Compensation; Executive; Governance; Safety, Health and Environmental Affairs.

TERMS EXPIRING IN 2009

Phillip W. Farmer
Retired Chairman of the Board of Harris Corporation, Melbourne, Florida (an international communications equipment company) from February 2003 until June 2003; Chairman, President and Chief Executive Officer from June 2000 to February 2003.
Other directorships: George Weston, Limited.
Committee memberships: Audit; Finance and Pension Funds; Governance.

H. Allen Franklin
Retired Chairman and Chief Executive Officer of Southern Company, Atlanta, Georgia (a super-regional energy company in the Southeast and a leading U.S. producer of energy) from April 2004 until July 2004; Chairman, President and Chief Executive Officer from April 2001 to March 2004; President and Chief Executive Officer from March 2001 until April 2001.
Committee memberships: Audit; Compensation; Safety, Health and Environmental Affairs.

James V. Napier
Retired Chairman of the Board of Scientific-Atlanta, Inc., Atlanta, Georgia (a manufacturer and designer of telecommunication systems, satellite-based communications networks, and instrumentation for industrial, telecommunications and government applications) from 1992 to 2000.
Other directorships: Engelhard Corporation; Intelligent Systems, Inc.; McKesson Corporation; Scientific-Atlanta, Inc.; WABTEC, Corp.
Committee memberships: Audit; Compensation; Executive; Finance and Pension Funds.

The Board of Directors of the Company
recommends a vote FOR the nominees named above.

DIRECTORS CONTINUING IN OFFICE


Philip J. Carroll, Jr.
Retired Chairman and Chief Executive Officer of Fluor Corporation, Aliso Viejo, California (an engineering, construction and diversified services company), from July 1998 to February 2002.
Other directorships: BAE Systems; Texas Medical Center.
Committee memberships: Compensation; Executive; Governance; Safety, Health and Environmental Affairs.

Donald M. James
Chairman and Chief Executive Officer of Vulcan since May 1997.
Other directorships: Protective Life Corporation; The Southern Company; Wachovia Corporation.
Committee memberships: Executive.


Livio D. DeSimone
Retired Chairman and Chief Executive Officer of 3M Company, St. Paul, Minnesota (a diversified manufacturer).
Other directorships: Milliken & Co.
Committee memberships: Compensation; Executive; Governance.

Douglas J. McGregor
Blue Point Capital Partners, Cleveland, Ohio (a national private equity firm), since January 2003; retired President and Chief Operating Officer, Burlington Industries, Inc., Greensboro, North Carolina (a leading softgoods manufacturer with interests in apparel, home fashions, carpets and rugs), from June 2000 until December 2002. Other directorships: KeyCorp.
Committee memberships: Audit; Finance and Pension Funds; Safety, Health and Environmental Affairs.

Donald B. Rice
Age: 66. Director since 1986.(*)
Chairman (since 2002), President and Chief Executive Officer of Agensys, Inc., Santa Monica, California (a biotechnology company developing monoclonal antibody therapeutics for cancer), since 1996.
Other directorships: Amgen, Inc.; Chevron Corp.; Wells Fargo & Company.
Committee memberships: Audit; Executive; Finance and Pension Funds; Governance.
(*)Dr. Rice was first elected a director in 1986, and served until May 1989, when he was appointed Secretary of the Air Force. He was reelected a director of Vulcan by the Board of Directors on February 12, 1993.

Vincent J. Trosino
President, Vice Chairman of the Board and Chief Operating Officer of State Farm Mutual Automobile Insurance Company, Bloomington, Illinois (a mutual insurance company), since 1998.
Committee memberships: Finance and Pension Funds; Safety, Health and Environmental Affairs.

BOARD OF DIRECTORS AND COMMITTEES

The Board has established six standing committees as follows:

-Executive Committee
-Audit Committee
-Compensation Committee
-Governance Committee
-Safety, Health and Environmental Affairs Committee
-Finance and Pension Funds Committee

Each committee, except the Executive Committee, is composed entirely of non-management directors.

Executive Committee

The Executive Committee has the same powers as the Board, except as limited by the New Jersey Business Corporation Act. In practice, the powers of the Executive Committee are exercised only for matters that arise between meetings of the Board. Members of the Executive Committee are Messrs. James (Chair), Carroll, DeSimone, Napier, Rice and Smith. The Executive Committee did not meet in 2005.

Audit Committee

The Audit Committee advises the Board and management from time to time with respect to internal controls, financial systems and procedures, accounting policies and other significant aspects of the Company's financial management. The Audit Committee also directly supervises the relationship between the Company and its external auditors. The Audit Committee's responsibilities under its written charter is to appoint the independent accountants to audit the Company's financial statements and perform other services related to the audit; review the scope and results of the audit with the independent accountants; review with management and the independent accountants the Company's interim and year-end operating results; review and oversee the internal accounting and auditing procedures of the Company; evaluate the independence of the external auditors; and approve and review any non-audit services to be performed by the independent accountants.

All members of the Audit Committee are non-management directors and are "independent" and "financially literate" within the meaning of the listing standards of the New York Stock Exchange, which we refer to as the NYSE rules. Please review the Report of the Audit Committee on page 23 of this proxy statement. Members of the Audit Committee are Messrs. Napier (Chair), Farmer, Franklin, McGregor and Rice. The Audit Committee met nine times during 2005.

The charter of the Audit Committee is attached as Appendix B to this proxy statement. It is also available on our website at www.vulcanmaterials.com. The Board has determined that Mr. Napier is an "audit committee financial expert" within the meaning of that term under the rules of the SEC. As discussed above, Mr. Napier is "independent" within the meaning of the NYSE rules and the Board's Director Independence Criteria, or Board standards. He has served on the Company's Board since 1983 and on its Audit Committee since 1987.

Compensation Committee
The Compensation Committee interprets and administers the Executive Incentive Plan, Management Incentive Plan and the 1996 Long-Term Incentive Plan. If the 2006 Omnibus Long-Term Incentive Plan is approved by the shareholders at the Annual Meeting, the Compensation Committee will also administer that plan. The committee is comprised solely of non-management directors who are "independent" within the meaning of the NYSE rules and the Board standards. The Compensation Committee also is responsible for determining and fixing the amount of compensation paid to each senior officer of the Company and each Division president ("Senior Executives"). In addition, it determines and fixes other benefits to be provided to such Senior Executives and certain other employees of the Company. It also makes recommendations to the Board concerning changes in the compensation of the directors. Members of the Compensation Committee are Messrs. Smith (Chair), Carroll, DeSimone, Franklin and Napier. The Compensation Committee met four times during 2005. The charter of the Compensation Committee is available on our website at www.vulcanmaterials.com.

Governance Committee
The Governance Committee is responsible for reviewing and assessing our policies and practices relating to corporate governance, including our Corporate Governance Guidelines. The committee also plans for the succession of the chief executive officer and other senior executives. The committee also serves as the nominating committee and as such it is responsible for identifying and assessing candidates for the Board, including making recommendations to the Board regarding such candidates. In fulfilling its duties, the Governance Committee, among other things:

-identifies individuals qualified to be Board members consistent with criteria established in its charter;
-recommends to the Board nominees for the next annual meeting of shareholders; and
-evaluates individuals suggested by shareholders.

In recommending director candidates to the Board, the Governance Committee Charter requires the committee to select individuals who, at a minimum, possess high ethical standards, integrity and sound business judgment. In its assessment of each potential candidate, the Governance Committee will review the candidate's experience, potential conflicts of interest, understanding of the Company's or related industries, financial acumen and such other factors the committee determines are pertinent in light of the current needs of the Board. The committee may also take into account the contribution of the candidate to the diversity of the Board, the ability of a candidate if elected a director to devote the time and effort necessary to fulfill his or her responsibilities as a Board member, and the needs of the Company given the range of talent and experience represented on the Board.

This committee is comprised solely of non-management directors who are "independent" within the meaning of the NYSE rules and Board standards. Members of the Governance Committee are Messrs. DeSimone (Chair), Carroll, Farmer, Rice and Smith. The Governance Committee met two times during 2005. The charter of the Governance Committee is available on our website at www.vulcanmaterials.com.

The Governance Committee considers director candidates recommended by shareholders. Any shareholder wishing to recommend a candidate for election at the 2007 Annual Meeting must submit that recommendation in writing, addressed to the committee, in care of the Secretary of the Company, at 1200 Urban Center Drive, Birmingham, Alabama 35242, by December 11, 2006. Timely recommendations by shareholders will receive equal consideration by the Governance Committee. Directors and members of management may also suggest candidates for director. In some cases, the committee engages, for a fee, the services of a third party executive search firm to assist it in identifying and evaluating candidates for director.

Safety, Health and Environmental Affairs Committee

The Safety, Health and Environmental Affairs ("SHE") Committee has the responsibility for reviewing our policies, practices and programs with respect to the management of safety, health and environmental affairs and monitoring our compliance with safety, health and environmental laws and regulations. Members of the SHE Committee are Messrs. Carroll (Chair), Franklin, McGregor, Smith and Trosino. The SHE Committee met two times during 2005.

Finance and Pension Funds Committee

The Finance and Pension Funds Committee has responsibility for overseeing our financial policies and recommending to the Board financial policies and actions to accommodate our goals and operating strategies while maintaining a sound financial condition. Its functions include keeping informed about our financial condition, recommending a dividend policy, reviewing and recommending changes in the quarterly dividend payments, and evaluating and making recommendations concerning the appropriate mix of debt and equity, incurrence of long-term debt, and changes in the authorized limit of short-term debt. The Finance and Pension Funds Committee is also responsible for overseeing the funding and management of assets for pension plans sponsored by the Company. To fulfill these functions, it establishes funding policies and methods consistent with pension plan objectives and the Employee Retirement Income Security Act of 1974, selects and removes investment managers, and appoints trustees for the pension plans. Members of the Finance and Pension Funds Committee are Messrs. Rice (Chair), Farmer, McGregor, Napier and Trosino. The Finance and Pension Funds Committee met two times in 2005.

Meetings and Attendance

The Board held eleven meetings in 2005. In 2005, each director attended more than 75% of the total number of meetings of the Board and meetings of the committees of which he was a member.

Annual Meeting Policy

Directors are expected to attend Vulcan's Annual Meeting of Shareholders. In furtherance of this policy, Vulcan's Board holds one of its regularly scheduled Board meetings on the same day as the annual meeting. In 2005, all of the Board members attended the annual meeting.

Presiding Director

Each year at the May Board meeting, the Board designates a non-management presiding director, a position which is filled by rotation among the chairs of the Board committees. The duties of the presiding director are delineated in our Corporate Governance Guidelines, which are available on our website at www.vulcanmaterials.com. The non-management directors met in executive session five times in 2005. The Chairman of the Finance and Pension Funds Committee, Donald B. Rice, served as the presiding director at the executive sessions after the annual meeting in 2005. The Company encourages constructive communications from our shareholders. Shareholders interested in communicating directly with the presiding director or with the non-management directors as a group, may do so by writing to Presiding Director, c/o Corporate Secretary, Vulcan Materials Company, P. O. Box 385014, Birmingham, Alabama, 35238-5014. The shareholder communications will be forwarded to the Board in accordance with the Policy on Shareholder Communications with the Board, adopted by the independent directors in February 2004.

Director Independence

As described in the Corporate Governance Guidelines, the Board believes that all of the non-management directors are independent under the NYSE rules, the Board standards, and the applicable SEC rules and regulations as determined by the Board in its business judgment.

The NYSE rules provide that a Vulcan director does not qualify as independent unless the Board affirmatively determines that the director has no material relationship with Vulcan (either directly or as a partner, shareholder or officer of an organization that has a relationship with Vulcan). The NYSE rules require a board to consider all of the relevant facts and circumstances in determining the materiality of a director's relationship with Vulcan and permit the Board to adopt and disclose standards to assist the Board in making determinations of independence. Accordingly, the Board has adopted the Director Independence Criteria to assist the Board in determining whether a director has a material relationship with Vulcan. The Director Independence Criteria, which should be read together with the NYSE rules, are attached to this document as Appendix A and are also available on Vulcan's website at www.vulcanmaterials.com under the heading "Investor Relations" and then under the heading "Corporate Governance."

In February 2006, the Board conducted an evaluation of director independence, based on the Director Independence Criteria, the NYSE rules and applicable SEC rules and regulations. In connection with this review, the Board evaluated commercial, charitable, consulting, familial or other relationships with each director or immediate family member and their related interests and Vulcan and its subsidiaries, including those relationships described under "Other Matters Relating to Executive Officers and Directors."

As a result of this evaluation, the Board affirmatively determined that Messrs. Carroll, DeSimone, Farmer, Franklin, McGregor, Napier, Rice, Smith and Trosino are independent directors under the Director Independence Criteria, the NYSE rules and the applicable SEC rules and regulations.

COMPENSATION OF DIRECTORS

Members of the Board who are not employees of the Company are paid a retainer of $45,000 per year, plus the following fees:

-$5,000 Board meeting fee for in-person attendance;
-$3,000 committee meeting fee for in-person attendance;
-$1,500 Board and committee fees for telephonic meetings or actions by written consent;
-$10,000 audit committee chair retainer fee; and
-$5,000 retainer fee for all other committee chairs.

We have a Deferred Compensation Plan for Directors Who Are Not Employees of the Company (the "Directors' Deferred Compensation Plan") under which non-management directors are permitted to defer the compensation to which they are entitled for specified periods or until they cease to be directors. The deferred amounts, at the election of the director, either (i) are credited with interest at prescribed rates or (ii) are converted into a number of deferred stock units equivalent to the number of shares of the Company's common stock (based on the market price at the time of deferral) that could be purchased with the amount deferred. Whenever a dividend is paid on Vulcan's common stock, the deferred stock unit accounts are credited with an additional number of stock units corresponding to the amount of the dividend. At the end of the deferral period, the deferred stock units are settled in shares of the Company's common stock and interest-based deferrals are settled in cash. The Directors' Deferred Compensation Plan also provides for a lump-sum settlement of the director's deferred compensation account in stock or cash, as applicable, if following a Change of Control (as defined in the Directors' Deferred Compensation Plan) (i) the participating director ceases to be a member of the Board, (ii) the Directors' Deferred Compensation Plan is terminated or (iii) the Company's capital structure is changed materially. The Directors' Deferred Compensation Plan was approved by the Company's shareholders in 1993.

We also have a Restricted Stock Plan for Nonemployee Directors (the "Restricted Stock Plan"), which was approved by the Company's shareholders in 2004. The Restricted Stock Plan was implemented to promote a greater alignment of interests between our non-management directors and our shareholders through increasing ownership of our common stock by the non-management directors and to assist us in attracting and retaining qualified individuals to serve as non-management directors of the Company by affording them an opportunity to share in our future success. Under the Restricted Stock Plan, a number of restricted shares determined annually by the Board (the "Restricted Shares") is granted to each non-management director. On June 1, 2005, 1,000 Restricted Shares were issued to each non-management director serving on that date. The Restricted Shares are held in special restricted accounts by our transfer agent and the non-management directors have no right to receive the Restricted Shares until the restrictions imposed by the plan either lapse or are waived. Generally, the restrictions expire when the non-management director reaches age 72 (or the then current mandatory retirement age for directors), or the non-management director ceases to be a director because of death or disability. However, our Chief Executive Officer has the power to waive restrictions in the event the non-management director fails to remain a director for any reason other than retirement at the mandatory age, death or disability. During the period the shares are restricted, the non-management directors have all of the rights and benefits of a shareholder with respect to the Restricted Shares, including the right to vote the shares and receive dividends on the shares, other than the right to sell, assign, pledge or otherwise transfer the Restricted Shares.

Cash dividends paid on Restricted Shares acquired under the Restricted Stock Plan for Nonemployee Directors are deferred in the form of deferred stock units. The number of deferred stock units is determined by multiplying the per share dividend amount by the sum of (i) number of Restricted Shares previously granted to the non-management director upon which restrictions have not yet lapsed and (ii) the number of deferred stock units previously credited to such non-management director under the Restricted Stock Plan and dividing the product by the average daily closing price per share of the Company's common stock for the 20 trading days prior to the dividend payment date. The deferred stock units are settled in Vulcan shares upon the non-management director's retirement, when the restrictions on the Restricted Shares expire.

In 1996, the Company's shareholders approved a Deferred Stock Plan for Nonemployee Directors of the Company (the "Deferred Stock Plan"). Under the Deferred Stock Plan, each non-management director received an annual grant of deferred stock units calculated by dividing an amount equal to 40% of the annual retainer payable to non-management directors then in effect by the average daily closing price per share of the Company's common stock

for the 20 trading days prior to the date of grant. Grants under the plan were discontinued in 1999. However, on each date on which a regular cash dividend is paid on the common stock, the account of each participating non-management director is credited with additional deferred stock units corresponding to the cash dividend paid on the number of shares of common stock evidenced by the deferred stock units credited to the account of each such non-management director. The entire balance of a non-management director's Deferred Stock account will be paid, in either a lump sum or installments at the election of such director, in the Company's common stock, upon the director's termination of service.

If the 2006 Omnibus Long-Term Incentive Plan is approved by the shareholders at the Annual Meeting, no further awards will be made to non-management directors under either the Restricted Stock Plan or the Deferred Stock Plan, except for dividend credits on existing stock unit balances.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following is information regarding persons known to us to have beneficial ownership of more than 5% of the outstanding common stock of the Company, which is our only outstanding class of voting securities.

Name and Address of
Beneficial Owner

Amount and Nature of
Beneficial Ownership

Percent of
Class

State Farm Mutual Automobile Insurance
Company and Affiliates
One State Farm Plaza
Bloomington, Illinois 61710

11,071,713 shares(1)

11.04%

Davis Selected Advisors, L.P.
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706

8,304,124 shares(2)

8.12%

(1)Based on information contained in the Schedule 13G/A, dated January 26, 2006, filed with the Securities and Exchange Commission. According to Schedule 13G, the total includes the following shares over which the listed entities have sole or share either or both voting and dispositive power:

Affiliate
State Farm Mutual Automobile Insurance Company
State Farm Life Insurance Company
State Farm Fire and Casualty Company
State Farm Growth Fund
State Farm Balanced Fund
State Farm Variable Product Trust
State Farm Insurance Companies Employee Retirement Trust
State Farm Insurance Companies Savings and Thrift Plan for U.S. Employees
-Equities Account
-Balanced Account

Shares
8,399,798
2,535
3,316
1,039,200
160,200
4,656
2,808

1,208,400
250,800

(2)Based on information contained in a Schedule 13G/A, dated December 31, 2005, filed with the Securities and Exchange Commission.

STOCK OWNERSHIP OF MANAGEMENT

The following table sets forth information, unless otherwise indicated, as of March 1, 2006, regarding beneficial ownership of our common stock by each of the directors, the Chief Executive Officer and the other four executive officers listed in the Summary Compensation Table below, and the directors and executive officers of the Company as a group. This total includes all stock-based holdings as set forth in the footnotes. This table indicates the alignment of the named individual's financial interest with the interests of our shareholders, because the value of the individual's total holdings will increase or decrease in line with the price of our common stock.

Name

Amount and Nature of
Stock-Based
Ownership

Percent
of Class

Directors(1)
Livio D. DeSimone
Phillip W. Farmer(2)
H. Allen Franklin
Douglas J. McGregor(3)
James V. Napier
Donald B. Rice
Orin R. Smith
Vincent J. Trosino
Chief Executive Officer and other
Executive Officers(4)
Donald M. James
Daniel F. Sansone
Guy M. Badgett, III
William F. Denson, III
James W. Smack
All Directors and Executive Officers as a group (17 persons)

16,806
62,747
17,019
11,436
50,350
20,914
38,146
61,368
6,769

1,655,187
220,001
291,705
169,280
264,406

3,272,122

*
*
*
*
*
*
*
*
*

1.65%
*
*
*
*

3.25%

*Less than 1% of issued and outstanding shares of Company common stock.

(1)Beneficial ownership for the directors includes all shares held of record or in street name, and, if noted, by trusts or family members. The amounts also include restricted shares granted under our Restricted Stock Plan for Nonemployee Directors and phantom shares settled in stock accrued under the Directors' Deferred Compensation Plan, and the Deferred Stock Plan for Nonemployee Directors, as follows:

Shares Owned
Directly or Indirectly

Restricted Shares

Phantom Shares Held Pursuant to Plans

Livio D. DeSimone
Phillip W. Farmer
H. Allen Franklin
Douglas J. McGregor
James V. Napier
Donald B. Rice
Orin R. Smith
Vincent J. Trosino

-0-
23,787
1,000
- -0-
1,350
3,550
21,950
3,150
1,500

5,950
6,445
5,550
4,000
6,445
6,445
6,445
6,445
2,000

10,856
32,515
10,469
7,436
42,555
10,919
9,751
51,773
3,269

(2)Includes 1,000 shares held in a trust of which Mr. Farmer is the trustee.
(3)Includes 1,350 shares held in a trust of which Mr. McGregor is the trustee.

(4)Beneficial ownership for the executive officers includes shares held of record or in street name. The amounts also include shares that may be acquired upon the exercise of options which are presently exercisable or that will become exercisable on or before May 1, 2006, and shares credited to the executives' accounts under our Thrift Plan for Salaried Employees ("Thrift Plan") as follows:

Shares Owned
Directly or
Indirectly

Exercisable
Options

Thrift Plan

Donald M. James
Daniel F. Sansone
Guy M. Badgett, III
James W. Smack

93,336
25,719
26,371
33,481
13,935

1,546,000
178,875
228,250
117,550
210,475

15,851
15,407
37,084
18,249
39,996

EXECUTIVE COMPENSATION

The following table sets forth information concerning the annual and long-term compensation for Mr. James and the four other executive officers who were the most highly compensated (based on combined salary and bonus) for the fiscal year ended December 31, 2005.

Summary Compensation Table

Annual Compensation

Long-Term Compensation
Awards

Name and
Principal Position

Year

Salary

Bonus(1)

Restricted
Stock
Awards
($)(2)

Securities Underlying Options(3)
(Number of Shares)

All Other Compensation
(4)

Donald M. James
Chairman and
Chief Executive Officer

2005
2004
2003

$1,050,006
$994,998
$962,508

$2,700,000
$1,400,000
$1,000,000

-0-
- -0-
$1,370,410

264,000
130,000
145,000

$121,940
$96,107
$72,324

Daniel F. Sansone
Senior Vice President,
Chief Financial Officer and Treasurer

2005
2004
2003

$397,210
$330,004
$318,004

$563,000
$220,000
$247,000

-0-
- -0-
$146,602

77,000
12,000
15,000

$31,612
$28,493
$23,561

Guy M. Badgett, III
Construction Materials Group

2005
2004
2003

$421,838
$403,340
$383,334

$400,000
$280,000
$236,000

-0-
- -0-
$258,147

77,000
25,000
28,000

$35,746
$32,264
$29,089

Senior Vice President, General Counsel and Secretary

2005
2004
2003

$342,500
$326,668
$307,840

$475,000
$250,000
$190,000

-0-
- -0-
$175,285

50,000
15,000
17,000

$29,900
$25,028
$19,280

James W. Smack
Construction Materials Group

2005
2004
2003

$421,838
$410,175
$408,006

$393,000
$260,000
$176,000

-0-
- -0-
$156,163

77,000
15,000
16,000

$34,308
$137,802
$38,733

(1)Consists of payments made under the Executive Incentive Plan ("EIP") or the Management Incentive Plan ("MIP"). See the information under the heading "Change of Control Employment Agreements" on page 27 below for information relating to payments in the event of a Change of Control.

(2)Consists of deferred stock units granted under the 1996 Long-Term Incentive Plan. The value of the units shown is based on the fair market value of the corresponding number of shares of the Company's common stock on the date of grant without giving effect to the diminution in value attributable to the restrictions on the units. The deferred stock units vest ratably in years six through ten following the grant and become payable after the tenth year. Payment may be deferred beyond the tenth year at the participant's option. Vesting is accelerated upon retirement at age 62 or older, death, disability, or Change of Control; non-vested units are forfeited upon termination of employment for any other reason. Dividend equivalents accrue as additional deferred stock units. For information on what constitutes a Change of Control, see "Change of Control Employment Agreements" on page 27, below.

The following table provides information about the aggregate amount of deferred stock units held by each of the named executive officers as of December 31, 2005.

Name

Aggregate Number of Deferred Units Held (includes dividend equivalent credits)

Aggregate Value Based on FMV of Common Stock at Year End ($67.975)

Donald M. James
Daniel F. Sansone
Guy M. Badgett, III
James W. Smack

109,457
11,259
19,212
14,351
11,570

$7,440,340
$765,331
$1,305,936
$975,509
$786,471

(3)See Option Grants Table on page 16 for more detail concerning the 2005 option grants.

(4)Other Compensation for 2005 consists of contributions made by the Company on behalf of each named employee to the Thrift Plan for Salaried Employees (the "Thrift Plan") and the Unfunded Supplemental Benefit Plan for Salaried Employees (the "Supplemental Plan"). Under the Supplemental Plan, participating employees whose Company-matching contributions to the Thrift Plan have been reduced as a result of the limitations imposed by Sections 401 (which limits employee contributions) and 415 (which limits total contributions) of the Internal Revenue Code of 1986, as amended, are provided with a benefit that is essentially equal to the benefit those employees would have received in the absence of such limitations. The Compensation Committee designates the participants under the Supplemental Plan. The following table itemizes the amounts contributed on behalf of or paid to each of the named executives as described herein.

Name

Thrift Plan Contributions

Supplemental Plan Contributions

Relocation Expenses

Donald M. James
Daniel F. Sansone
Guy M. Badgett, III
James W. Smack

$10,860
$10,860
$10,860
$10,860
$10,860

$111,080
$20,752
$24,886
$19,040
$23,448

-0-
- -0-
- -0-
- -0-
- -0-

OPTION GRANTS IN 2005

The following table sets forth each grant of stock options during 2005 to Mr. James and the other named executive officers:

Name

Number of Securities Underlying Options Granted(1)

% of Total Options Granted to Employees

Exercise or Base Price
($/sh)

Expiration Date

Grant Date
Present Value ($)(2)

Donald M. James

Daniel F. Sansone

Guy M. Badgett, III


James W. Smack

146,000
118,000

14,000
12,000
51,000

26,000
51,000

17,000
33,000

26,000
51,000

13.92

4.06

4.06

2.64

4.06

$57.10
$68.63

$57.10
$54.84
$68.63

$57.10
$68.63

$57.10
$68.63

$57.10
$68.63

2/10/2015
12/8/2015

2/10/2015
5/13/2015
12/8/2015

2/10/2015
12/8/2015

2/10/2015
12/8/2015

2/10/2015
12/8/2015

$1,535,920
$1,688,580

$147,280
$122,400
$729,810

$273,520
$729,810

$178,840
$472,230

$273,520
$729,810

(1)Reflects nonqualified options granted pursuant to the 1996 Long-Term Incentive Plan. The exercise price of all options granted equals the fair market value of the shares of the Company's common stock on the date of grant. The February and May 2005 options are subject to vesting in 20% increments based on the recipient's continued employment over a five-year period beginning on January 1, 2006 (the "first vesting date") and on each of the second, third, fourth, and fifth anniversaries of the first vesting date, with vesting to be accelerated upon the optionee's death, disability or retirement or upon a Change of Control of the Company. On December 8, 2005, the Committee made awards of non-qualified stock options which normally would have been granted early in 2006. These grants, which are in lieu of long-term grants for 2006, were made so as not to be governed by new accounting standards regarding the expensing of stock options which take effect in 2006. However, due to the annual grant limitation under the 1996 Long-Term Incentive Plan, 40% of the award to the CEO was granted in December 2005; the remaining portion of Mr. James' award was granted in January 2006. Those options were fully vested at grant but have a 3-year resale restriction. For information on what constitutes a Change of Control, see "Change of Control Employment Agreements" on page 27, below.

(2)Pursuant to the rules of the Securities and Exchange Commission, we have elected to provide a grant date present value for these option grants using a Black-Scholes pricing model. For the February 10, 2005 grants, the assumptions used to determine the value of the options include: an expected volatility of 25.18% (derived by using daily closing stock prices for the nine and one-half years preceding the grant date), a dividend yield of 2.21%, an interest rate of 4.07% (the rate on a U.S. Treasury note with a maturity date of nine years from the grant date), and an expected time of exercise of nine and one-half years from grant date. The assumptions used to determine the value of the May 2005 grant include: an expected volatility of 25.26% (derived by using daily closing stock prices for the nine and one-half years preceding the grant date), a dividend yield of 2.19%, an interest rate of 4.12% (the rate on a U.S. Treasury note with a maturity date of nine years from the grant date), and an expected time of exercise of nine and one-half years from grant date. For the December 2005 grants, the assumptions used to determine the value of the options include: an expected volatility of 25.89% (derived by using daily closing stock prices for the nine and one-half years preceding grant date), a dividend yield of 2.11%, an interest rate of 4.47% (the rate on a U.S. Treasury note with a maturity date of nine years from the grant date), and an expected time of exercise of nine and one-half years from grant date. In addition, adjustments to the grant date values were made for non-transferability and risk of forfeiture based on historical rates. We do not believe that the values estimated by the Black-Scholes model, or any other model, are necessarily indicative of the values that might eventually be realized by an executive.

AGGREGATED OPTION EXERCISES IN 2005 AND 2005 OPTION VALUES

The following table sets forth for each of Mr. James and the other named executive officers the number and dollar value of options exercised in 2005 and of unexercised options outstanding at December 31, 2005.

Shares Acquired on Exercise

Value
Realized(1)

Number of Securities
Underlying Unexercised Options
At December 31, 2005(2)

Value of Unexercised
In-the-Money Options at
December 31, 2005(3)

Name

(#)

($)

Exercisable

Unexercisable

Exercisable

Unexercisable

Donald M. James
Daniel F. Sansone
Guy M. Badgett, III
James W. Smack

150,000
35,850
22,200
38,025
- -0-

$7,443,255
$1,451,358
$846,857
$1,059,669
- -0-

1,241,200
165,875
227,900
126,550
196,275

427,800
50,800
76,200
50,200
54,400

$32,536,275
$3,116,526
$5,017,218
$2,245,966
$4,196,150

$9,338,514
$1,035,329
$1,680,147
$1,097,150
$1,099,880

(1)Calculated by multiplying the difference between the fair market value of the common stock on the date of the exercise and the option exercise price by the number of options exercised.

(2)Upon a Change of Control of Vulcan, all outstanding options will become exercisable. For information on what constitutes a Change of Control, see "Change of Control Employment Agreements" on page 27 below.

(3) The aggregate value of the unexercised in-the-money options is calculated based on the difference between the fair market value of the underlying securities as of December 31, 2005 and the option exercise price. The fair market value used to estimate the in-the-money value at year end was $67.975 (high/low average price of the common stock on the New York Stock Exchange on December 30, 2005). The ultimate value of an option is dependent on the market value of the common stock at the time of exercise.

LONG-TERM INCENTIVE PLANS - AWARDS IN 2005

Performance Share Units(1)

Estimated Future Payouts
Number of Shares(1)

Name

Number of Performance Share Units

Performance
Period

Threshold
(# Units)

Target
(# Units)

Maximum
(# Units)

Donald M. James
Daniel F. Sansone
Guy M. Badgett, III
James W. Smack

36,000
4,300
4,300
2,600
4,300

1/1/2005 to 12/31/2007
1/1/2005 to 12/31/2007
1/1/2005 to 12/31/2007
1/1/2005 to 12/31/2007
1/1/2005 to 12/31/2007

-0-
- -0-
- -0-
- -0-
- -0-

36,000
4,300
4,300
2,600
4,300

72,000
8,600
8,600
5,200
8,600

(1)Consists of awards made pursuant to the Company's 1996 Long-Term Incentive Plan. A performance share unit ("PSU") is equal to a share of the Company's common stock, but carries no voting or dividend rights. The payment for PSUs may range from zero to two hundred percent of target. Fifty percent of the payment is based upon the Company's 3-year-average Total Shareholder Return ("TSR") performance relative to the 3-year average TSR performance of a group of other publicly-traded companies, which were selected by the Compensation Committee at the time the grants were made. The remaining fifty percent of the payment is based upon each business segment's 3-year-average economic profit ("EP") performance relative to a pre-established 3-year-average EP target. Payment

for the 2005 grant will be made in shares of the Company's common stock. PSUs vest after three years. Vesting is accelerated upon retirement, death, disability, or Change of Control, without proration for the participant's period of employment; non-vested units are forfeited upon termination of employment for any other reason. For information on what constitutes a Change of Control, see "Change of Control Employment Agreements" on page 27 below.

EQUITY COMPENSATION PLANS

The table below sets forth information regarding the number of shares of our common stock authorized for issuance under all of our equity compensation plans as of December 31, 2005.

Equity Compensation Plan Information

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)

Weighted-average exercise price of outstanding options, warrants and rights
(b)

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)

Equity compensation plans approved by security holders(1)

1996 Long Term Incentive
Plan (For Employees)

Stock Options

Performance Share Units

Deferred Stock Units(2)

Employees - Total

Deferred Stock Plan for
Non-employee Directors(3)

Restricted Stock Plan for
Non-employee Directors(4)

Total

Equity compensation plans not approved by security holders

Total

7,510,066

567,758

301,314

8,379,138

13,633

53,396

8,446,167

None

8,446,167

$46.41

$46.41

1,911,640

281,965

80,126

2,273,731

None

2,273,731

(1)All of the Company's equity compensation plans have been approved by the shareholders of the Company. Column (a) sets forth the number of shares of common stock issuable upon the exercise of options, warrants or rights outstanding under the 1996 Long-Term Incentive Plan ("1996 LTIP"), the Deferred Stock Plan for Nonemployee Directors and the Restricted Stock Plan for Nonemployee Directors. The weighted-average exercise price of outstanding stock options is shown in Column (b). The remaining number of shares that may be issued under the 1996 LTIP and the nonemployee director plans are shown in Column (c). However, upon shareholder approval of the proposed 2006 Omnibus Long-Term Incentive Plan ("2006 LTIP"), the remaining shares available for issuance under these plans will not be available for future grants, and the plans will be used only for the administration of grants that are outstanding at the time the 2006 LTIP is approved.

The number of shares available for granting awards under the 1996 LTIP in any calendar year consists of: (i) .95% of the issued common shares of the Company (including treasury shares) as of the first day of each calendar year, (ii) the number of shares available for awards under the 1996 LTIP in previous years but not granted, (iii) the number of shares granted under the 1996 LTIP and subsequently forfeited, and (iv) all other grants under the 1996 LTIP that terminated without delivery of shares. The maximum number of shares that may be granted to any participant in a calendar year is 300,000. No more than one-third of the shares available for awards in any calendar year may be used for grants of restricted stock or restricted stock units. For more information concerning the proposed 2006 LTIP, see the information set forth under Proposal 2 - Approval of 2006 Omnibus Long-Term Incentive Plan, set forth on pages 28 - 30 below, and Appendix C hereto.

(2) See "Compensation of Directors" above for a description of the Deferred Stock Units.
(3) See "Compensation of Directors" above for a description of the Deferred Stock Plan for Nonemployee Directors.
(4) See "Compensation of Directors" above for a description of the Restricted Stock Plan for Nonemployee Directors.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors (the "Committee"), is comprised entirely of directors who qualify as "independent directors" under the rules of the New York Stock Exchange. The activities of the Committee are conducted pursuant to the Compensation Committee Charter. The Committee's powers include the authority, in its sole discretion, to retain from time to time compensation consultants and other advisors to assist the Committee in fulfilling its responsibilities.

Under the Compensation Committee Charter, the responsibilities of the Committee include establishing the compensation levels for the Chief Executive Officer ("CEO") and all other senior executives of Vulcan, including the "named executives" shown in the Summary Compensation Table. In the case of the CEO, the compensation decisions of the Committee are ratified by the other independent directors of the Board.

Overview

The Committee's main focus and goal is to develop a total compensation program for the CEO and the other senior executives designed to enhance the profitability of Vulcan and shareholder value by aligning closely the financial interests of Vulcan's executives with those of its shareholders. Additionally, the Committee strives to achieve a compensation package that attracts, motivates and retains executive talent. Specifically, the objectives of the Committee's compensation practices are to:

-

- -
- -

- -

- -
- -

offer a total compensation program that is competitive with the compensation practices of the companies with which Vulcan competes for talent;
provide incentives that attract and retain superior executive talent;
tie a significant portion of the executive compensation to Vulcan's achievement of pre-established annual and long-term financial objectives;
establish rewards for recognizing the executive's individual contributions to the accomplishmentof the pre-established financial objectives;
encourage substantial ownership of Vulcan's stock; and
align the interests of executives with those of Vulcan's shareholders.

The Committee believes that the compensation paid to each executive should be closely linked to the performance of the Company, the performance of the applicable business unit, and the executive's own personal performance. Therefore, a significant portion of an executive's compensation is at risk and is tied to the achievement of pre-established annual and long-term financial objectives.

Compensation Program and Awards for 2005

The Committee begins the process of establishing compensation for the senior executives, including the CEO, by reviewing market and competitive information and the recommendations provided by the compensation consultant. The consultant's recommendations are based on information reported during the previous proxy cycle, general industry surveys obtained from national firms specializing in executive compensation programs and practices, and years of practical experience working with corporations and boards throughout the U.S.The surveys used by the consultant include a broad range of industrial companies, some of which are also included in the S&P 500 Index and Wilshire 5000 M&S Sector Index. The performance of both of these indices is charted in the Shareholder Return Performance Presentation on page 25. Based on the information provided by the consultant and after taking into account the relative total market compensation for each executive position, it is the Committee's practice to set the target level for each compensation component for each executive at approximately the 50th percentile of competitive market practice. The compensation program for executives is comprised of base salary, short-term cash incentives, long-term equity-based incentives, benefits and perquisites. The short-term and long-term incentive targets are expressed as a percentage of salary. The compensation for Donald M. James, Chairman and Chief Executive Officer, consists of the same components and is established by the same process as described herein.

--Base Salary

The Committee annually reviews the salary of each executive in relation to the targeted base salary established for the executive's position as described above under the "Compensation Program and Awards for 2005" heading. Salaries may be adjusted to reflect individual performance, increased responsibilities, and changes in the targeted base salary.

When setting Mr. James' base salary in February 2005, the Committee considered the competitive position of his base salary taking into account the general industry surveys mentioned above, the financial performance of Vulcan in 2004, and Mr. James' leadership in pursuing the divestiture of Vulcan's chemicals business. Also, the Committee considered his performance in actively pursuing initiatives to reinforce Vulcan's reputation as a leader in ethical business practices, employee safety and health and social responsibility. The Committee set Mr. James' base salary at $1,060,000 for 2005, which represented a 6.0% increase over his 2004 base salary.

--Short-Term Cash Bonus under the Executive Incentive and Management Incentive Plans

Vulcan has established the Executive Incentive Plan ("EIP") and the Management Incentive Plan ("MIP") which are used to award cash incentives that are directly linked to the achievement of pre-established Economic Profit ("EP") performance targets that are set for the Company and each of its business units during the first 60 days of the year for which an award may be earned. Annually, an EP target is established for Vulcan as a whole and for each of the business units by averaging the previous year's targeted EP and that year's actual EP. As used at Vulcan, EP is the added value resulting from deducting taxes and a capital charge from the year-end net operating profit. Both the EIP and the MIP provide a means of rewarding executives and managers who have contributed to the profitability and operating results of the Company. Payments under the Plans are awarded based on the degree to which performance targets are achieved. The EP performance target for Vulcan as a whole is used to measure the CEO's performance and the EP performance target of the applicable business unit is used to measure the performance of each of the other participating executives. It is the view of the Committee and management that EP is an effective indicator of Vulcan's performance because it quantitatively measures the effective use of Vulcan's assets, and does not reward the under use or misuse of assets. No individual executive or manager may participate in both the EIP and MIP concurrently.

The EIP, which was approved by shareholders in 2001, is used for making annual awards to the CEO and the other most highly compensated executives. Annually, at its February meeting the Committee determines the executives who will participate in the EIP and establishes a fixed percentage representing the maximum award payable to each executive for the current year if the pre-established performance criteria are fully satisfied. The financial measures and the formula that must be used to establish the maximum amount available (the "Pool") for any given level of Company performance are defined by the Plan as 4% of consolidated net earnings in excess of 6% of net capital for the prior year. In 2005, the Award Percentages ranged from 15% to 40% of the available Pool for the executives eligible to receive an award under the EIP. The Committee may exercise discretion to reduce the amount of the

award that is determined under the formula. The EIP is a performance-based plan that meets the requirements of Section 162(m) of the Internal Revenue Code.

The MIP, which was approved by the shareholders in 1973, is similar in structure and administration to the EIP, except that it does not meet all of the requirements of Section 162(m), and is used for administering performance-based awards to middle management and to members of senior management who do not participate in the EIP. Total payments under the MIP in any year cannot exceed 10% of consolidated net earnings in excess of 6% of net capital for the prior year.

The Committee is responsible for setting the payments for the executives who participate in the EIP, and the Committee may only make downward adjustments to the Award Percentages previously established for each executive who participates in the EIP. Under the MIP, the Committee may adjust, up or down, the amount of an award to each executive, provided however that the total amount paid to all participants does not exceed the maximum amount permitted by the Plan, as described above. Adjustments made by the Committee are based on:

-the operating performance related to the safety and health of Vulcan's employees;
-health and environmental considerations for the communities in which Vulcan operates;
-consistent above target performance over a three-year period;
-the successful implementation of Vulcan's strategic objectives; and
-the individual performance of each executive.

The payments under the MIP and EIP for 2005 were 52% and 35%, respectively, of the maximum award amounts allowed under the Plans.

The cash bonus paid to Mr. James for 2005 under the EIP was 61% of the maximum allowable bonus and 254% of his target bonus. This payment primarily was based on the extent to which Vulcan exceeded the EP target for the year 2005 and the Company's sustained above target performance over a three-year period. In addition the Committee considered Mr. James' leadership related to the successful divestiture of Vulcan's chemicals business, the performance of Vulcan's growth initiatives, and Vulcan's safety, health and environmental performance.

--Long-Term Equity-Based Incentives under the 1996 Long-Term Incentive Plan ("LTIP")

Vulcan's long-term incentive program, which currently consists of stock options and performance share awards, is designed to motivate executives to meet Vulcan's performance goals over a longer term. The objectives considered in determining eligibility for and the level of longer term incentive payments principally are the achievement of pre-established levels of Economic Profit, Total Shareholder Return and share price appreciation. Long-term incentives awarded in 2005 to senior executives consist of non-qualified stock options and performance shares.

The amount awarded to each executive is based on the long-term incentive target established by the Committee as described above under the "Compensation Program and Awards for 2005" heading. The award value of the long-term incentive grant for each executive is determined by multiplying the applicable long-term target percentage by the applicable base salary. Subject to the limitations under the LTIP, the Committee may adjust the award value to reflect the Company's past performance relative to Total Shareholder Return, Earnings Per Share, Return on Investment, or other quantifiable financial measure deemed appropriate by the Committee.

In February2005, the Committee made awards of nonqualified stock options and performance shares to eligible executives, including the CEO. Approximately 50% of the target long-term value for each executive was awarded in stock options; the other 50% was awarded in performance shares.

Stock Options. The options have a ten-year term and vest in annual increments of 20% of the total award over years one through five, unless vesting is accelerated due to death, disability, or retirement.

Performance Shares. Performance shares vest in three years. The percentage of shares earned, which is dependent upon the Company's three-year average Total Shareholder Return performance relative to a comparison group of companies and business segment three-year average Economic Profit performance, can range from 0% to 200%.

In December 2005, the Committee made awards of non-qualified stock options which under normal circumstances would have been granted early in 2006. These grants, which are in lieu of long-term grants for 2006, were made so as not to be governed by new accounting standards regarding the expensing of stock options which take effect in 2006.

December 2005 Stock Options. The options were fully vested as of the date of the grant. However, shares obtained upon exercise are subject to a three-year holding period through December 31, 2008.

The exercise prices of the stock options granted in February and December are equal to the market price of Vulcan's common stock on the dates of grant. Therefore, the options will have value only if Vulcan's stock price increases, resulting in a commensurate benefit for Vulcan's shareholders.

In February 2005, the Committee awarded Mr. James equity grants consisting of 146,000 nonqualified stock options and 36,000 performance share units; the combination of the two grants being equal to a target level award consistent with competitive market practice. The Committee also awarded a December 2005 nonqualified stock option grant to the CEO. However, due to the annual grant limitation underthe 1996 LTIP, 40% of the award to the CEO was granted in December 2005; the remainingportion of Mr. James' awardwas granted in January 2006. These grants, which are in lieu of long-term grants for 2006, were made so as not to be governed by new accounting standards regarding the expensing of stock options which take effect in 2006.

--Deferred Compensation Plan

The Vulcan Executive Deferred Compensation Plan is a non-qualified plan that allows company and business unit officers with an annual cash compensation of $180,000 or higher to defer receipt of up to 50% of the executive's salary and up to 100% of the executive's annual cash bonus until the date selected by the participant. The amounts deferred are deemed invested as designated by participants in Vulcan common stock (a "phantom stock" account) or in dollar-denominated accounts that mirror the gains or losses of the various investment options available under Vulcan's 401(k) plan. The Executive Deferred Compensation Plan does not offer any guaranteed return to the participants.

The Executive Deferred Compensation Plan is funded by Participant deferrals through a "Rabbi Trust" owned by Vulcan and participants have an unsecured contractual commitment from Vulcan to pay the amounts due.

--Benefits and Perquisites

Executives participate in each of the benefit plans or arrangements that are made available to all salaried employees generally, including medical and dental benefits, life, accidental death and disability insurance, and pension and savings plans. In addition, the CEO and the named executive officers participate in the Unfunded Supplemental Benefit Plan (see footnote 4 of the Summary Compensation Table) and have Change of Control Employment Agreements (see page 27 of this proxy statement). The CEO also has a Supplemental Executive Retirement Agreement which is discussed in more detail under the heading "Retirement Income Plan" on page 25 of this proxy statement.

Vulcan provides company-owned cars to the CEO and the named executives for their use. Additionally, Vulcan pays for the insurance, maintenance and fuel for such vehicles. Executives pay an appropriate charge for personal use. Vulcan makes its owned aircraft available to the CEO and senior executives for business travel. Although the aircraft is available to the CEO and the named executives for personal use at the expense of the executive, there was no personal use of the aircraft in 2005.

Vulcan does not provide other perquisites to its CEO or other senior executives such as club memberships or financial planning services.

Compliance with Internal Revenue Code Section 162(m)

Section 162(m) of the Internal Revenue Code prohibits a public corporation from taking a deduction for compensation paid to its chief executive officer or any of its four other highest paid executive officers in excess of $1million. Internal Revenue Service ("IRS") regulations exempt certain "qualified performance-based compensation" from the application of the Section 162(m) limitation. It is the Committee's understanding that payments pursuant to the Executive Incentive Plan and all grants made under the 1996 LTIP in prior years, except for deferred stock units, qualify as qualified performance-based compensation, as defined in the IRS regulations. The deferred stock units are not counted towards the $1 million cap for purposes of calculating the 162(m) limitation until the units are paid.

Compensation Committee

Orin R. Smith, Chairman
Livio D. DeSimone
H. Allen Franklin
James V. Napier

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board is responsible for, among other things, reviewing the Company's financial statements with management and the Company's independent auditor. The Audit Committee acts under a written charter which is available on our website at www.vulcanmaterials.com. Each member of the Audit Committee is an independent director as determined by our Board, based on the requirements of the New York Stock Exchange and the Securities and Exchange Commission.

The Company's management has the primary responsibility for the Company's financial statements and financial reporting process, including the system of internal controls. The Company's independent auditor is responsible for expressing an opinion on the conformity of the Company's audited financial statements with generally accepted accounting principles. The Company's independent auditor also audits, in accordance with the standards of the Public Company Accounting Oversight Board, the effectiveness of the Company's internal control over financial reporting. The Audit Committee is responsible for monitoring and overseeing these processes.

In this context, the Audit Committee has reviewed and discussed the Company's audited financial statements with management and the independent auditor. The Audit Committee has discussed with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees). In addition, the Committee has received from the independent auditor the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with the Audit Committees) and discussed with the independent auditor the auditor's independence and considered whether the auditor's provision of any non-audit services is compatible with the auditor's independence.

Based on the reviews and discussions noted above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, for filing with the Securities and Exchange Commission.

Audit Committee
James V. Napier, Chairman
Phillip W. Farmer
H. Allen Franklin
Douglas J. McGregor
Donald B. Rice

INDEPENDENT AUDITORS

Aggregate fees billed to us for the fiscal years ended December 31, 2005 and 2004, by Deloitte & Touche LLP, the member

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